The U.S. is losing control of inflation, according to Twitter co-founder Jack Dorsey.
In a tweet posted on Friday evening, the crypto enthusiast joined the inflation debate by saying that “hyperinflation is going to change everything. It’s happening.” Hyperinflation is when inflation gets out of control and market participants lose faith in national currencies.
“Yup…we live with this built in our mental models in Nigeria…inflation is currently 16%,” responded Twitter user Tayo Oviosou, from a country where Bitcoin is popular. “It will happen in the US soon, and so the world,” replied Dorsey.
Hyperinflation happened in Germany back in the 1920s, in Latin America in the 1980s, and in Zimbabwe in the early 2000s, where it is still going on to this day.
Dorsey’s tweets should be music to the ears of Bitcoin traders, as digital currency is seen as an alternative to national currencies. Nonetheless, they failed to spark a rally in Bitcoin prices over the weekend.
Opposing Opinions on Inflation
The controversy as to whether U.S. inflation is getting out of control comes a few hours after Fed Chair Jerome H. Powell said that inflation would likely stay elevated into the next year. The Fed chief made this comment in a speech at the Bank of International Settlements conference, signaling that inflation may turn from a transitory to a permanent problem.
The Fed has been keeping a close eye on inflation as price stability is one of its dual mandates, the other being high employment. It has already determined that the elevated inflation warrants removing its accommodative policy through tapering, the rolling back of its bond-buying program.
Adding fuel to the inflation debate is a statement by the U.S. Treasury Secretary Janet Yellen on Sunday, maintaining that the U.S. isn’t losing inflation control.
“On a 12-month basis, the inflation rate will remain high into next year because of what’s already happened. But I expect improvement by the middle to end of next year – second half of next year,” Yellen said in a CNN interview on Sunday morning.
Bottom Line on Inflation
While it is still unclear which side is right on the inflation debate, one thing is certain: the longer inflation stays elevated, the higher the risk that it gets out of control, and the greater the damage to the U.S. economy and the Fed’s credibility. So Wall Street will be watching.
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